Oil and Gas Evaluation Report : Oil & Gas Evaluation Professionals : Obsidian Energy Company : · Seismic Interpretation, Petroleum Engineering

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When using a small dataset of wells in a shale play to predict U.S. resource gas supply, estimates can vary widely.   The U.S. Energy Information Administration (EIA) estimated in 2008 that the U.S. shale gas supply was 32.8 Trillion cubic feet (Tcf).  This is up 34% from 21.7 Tcf in 2007.  It is safe to say that 2009 and 2010 will see similar if not more explosive growth.  With this tremendous increase in resource comes increases uncertainty of that resource estimate.  Richard Nehring in the AAPG Explorer article by David Brown, "Uncertainty Clouds Gas Resource Estimates" suggests there are several risks about estimating reserves of these shale plays:

1. Shale production is new and not yet fully understood.   This point he refers to the uncertainty of the decline curve on an individual well.  He points out that because the shale plays are so new that the long term reserve number of an individual well and thus the total resource is still unknown.  An example he uses is the Marcellus Shale where the high resource estimate is 5X the low estimate.
2. Effects of economics on shale plays.  We all know that economics changes with time.  But we don't know how production of these shale plays will react to price variations.  With any downward movement in price the estimate should decrease.   On the other hand as price goes up will the shale plays in the Rockies and Alaska add to the resource estimates we see now?  Nehring states "We don't know a lot and we're not learning a lot about the higher-cost resource, because people are ignoring it."  It is a safe bet that as price increases more attention will be paid to these overlooked plays. 
3. Poor prediction of past estimates.   Much of the range in supply estimates stem from the wide range of methodologies used in determining these estimates.  A baseline approach used by the Potential Gas Committee (PGC) estimates a total natural gas resource base of 1,836 trillion cubic feet (Tcf).  The highest resource estimate in the Committee's 44 year history.  This assessment does not "assume a time schedule nor a specific market price for discovery or production of future gas supply".  The EIA estimate in the opening paragraph is a proven resource base confined by SEC rules and economic viability of the supply.

The resource estimates that we see are what they are, estimates.  As all shale plays mature, these resource assessments will be revised upwards and downwards.  If natural gas is to be a significant part of electrical generation and transportation in the future, a domestic resource that can meet these needs 30 to 50 years out is mandatory.  There's a lot riding on these projections.